Stroud Resources Ltd. — Interim / Quarterly Report 2021

Aug 31, 2021

Condensed Interim Consolidated Financial Statements

Stroud Resources Ltd. For the six months ended June 30, 2021 and June 30, 2020

Management's Responsibility for the Consolidated Financial Statements

The accompanying condensed interim consolidated financial statements of Stroud Resources Ltd. (the "Company") are the responsibility of management and have been approved by the Board of Directors.

The condensed interim consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the annual consolidated financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the date of the condensed interim consolidated statements of financial position. In the opinion of management, the condensed interim consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards.

Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.

The Board of Directors is responsible for reviewing and approving the condensed interim consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the annual consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the annual consolidated financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company ' s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

"Howard Atkinson" Howard Atkinson Director

"Mirsad Jakubovic" Mirsad Jakubovic Chief Financial Officer

Stroud Resources Ltd.

Incorporated under the laws of Ontario

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

[Expressed in Canadian dollars]

As at

	June 30,	December 31,
	2021	2020
	$	$
ASSETS Current Cash and cash equivalents Accounts receivable Prepaid expenses and sundry assets	3,105,272 14,367 295,829	4,271,143 67,346 47,168
Total current assets	3,415,468	4,385,657
Mineral properties and deferred costs_[note 6] Oil and gas interests[note 6]_	— —	— —
	3,415,468	4,385,657
LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current Accounts payable and accrued liabilities Provision_[note 7] Advances from shareholders[note 8]_	70,196 — —	63,336 — 4,411
Total current liabilities	70,196	67,747
Commitments and contingencies_[note 2,3,6,8 and 13] Shareholders' deficiency[note 9]_ Share capital Shares to be issued Reserves Deficit Accumulated other comprehensive income	25,223,995 — 3,980,055 (25,860,509) 1,731	24,986,395 237,600 3,980,055 (24,887,871) 1,731
Total shareholders' deficiency	3,345,272	4,317,910
	3,415,468	4,385,657

See accompanying notes

On behalf of the Board:

"Howard Atkinson" "Mirsad Jakubovic`` Director Director

Stroud Resources Ltd.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

OIL AND GAS OPERATIONS Revenue, net of royalties Operating expenses Income (loss) from oil and gas operations ADMINISTRATIVE EXPENSES Administrative fees Business development Director fees Licences and fees Impairment of mineral properties_[note 6]_ Office and general Professional fees Rent Total administrative expenses Loss before income taxes Interest income Net loss and comprehensive loss for the period Basic and fully diluted loss per share Weighted average number of common shares outstanding [000's]

For the Three Months For the Three Months For the Six Months For the Six Months June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Cad $ Cad$ Cad $ Cad$ 8,733 4,038 16,465 9,308 6,154 6,890 11,180 12,758 2,579 (2,852) 5,285 (3,450) 15,000 7,500 30,000 15,000 9,021 1,143 14,707 3,058 15,000 11,250 30,000 22,500 5,820 4,575 16,007 12,137 582,004 57,787 852,542 131,357 3,886 819 8,042 1,703 12,529 28,434 34,097 50,943 941 872 1,883 1,722 644,201 112,380 987,278 238,420 (641,622) (115,232) (981,993) (241,870) 3,148 1,223 9,355 4,829 (638,474) (114,009) (972,638) (237,041) $(0.003) $(0.003) $(0.02) $(0.006) 49,504 36,935 49,504 36,935

See accompanying notes

Stroud Resources Ltd.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES Net loss for the period Add items not involving cash Net change in non-cash working capital balances related to operations_[note 10]_ Cash provided (used) in operating activities FINANCING ACTIVITIES Advances from shareholders Cash provided by financing activities Net increase (decrease) in cash and cash equivalents during the period Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period

For the Three Months Ended For the Three Months Ended For the Six Months Ended For the Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Cad $ Cad$ Cad $ Cad$ (638,474) (114,009) (972,638) (237,041) (214,690) (77,097) (188,822) (315,572) (853,164) (191,106) (1,161,460) (552,613) — — (4,411) (10,343) — — (4,411) (10,343) (853,164) (191,106) (1,165,871) (562,956) 3,958,436 979,291 4,271,143 1,351,141 3,105,272 788,185 3,105,272 788,185

See accompanying notes

Stroud Resources Ltd.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICENCY)

[Expressed in Canadian dollars]

==> picture [504 x 314] intentionally omitted <==

----- Start of picture text -----

Accumulated Total
other shareholders'
comprehensive equity
Common shares Shares to be issued Other reserves Deficit income (deficiency)
# $ # $ $ $ $ $
December 31, 2019 36,835,005 21,869,682 — — 3,577,072 (24,439,593) 1,731 1,008,892
Net loss for the period — — — — — — — —
March 31, 2020 36,835,005 21,869,682 - - 3,577,072 (24,439,593) 1,731 1,008,892
Net loss for the period — — — — — (114,009) — (114,009)
June 30, 2020 36,835,005 21,869,682 - - 3,577,072 (24,553,602) 1,731 894,883
Issuance of shares in private placement 7,500,000 2,768,128 — — — — — 2,768,128
Issuance of warrants [note 9(b)] — (528,746) — — 528,746 — — —
Exercise of warrants 1,303,313 195,497 — — (27,239) — — 168,258
Shares to be issued — — 275,000 97,500 — — — 97,500
Net loss for the period — — — — — (111,117) — (111,117)
September 30, 2020 45,638,318 24,304,561 275,000 97,500 4,078,579 (24,664,719) 1,731 3,817,651
Exercise of warrants 3,141,131 564,058 — — (65,650) — — 498,408
Exercise of stock options 275,000 117,776 175,000 140,100 (32,874) — — 225,002
Net loss for the period — — — — — (223,152) — (223,152)
December 31, 2020 49,054,449 24,986,395 450,000 237,600 3,980,055 (24,887,871) 1,731 4,317,910
Exercise of stock options 450,000 237,600 (450,000) (237,600) — — —
Net loss for the period — — — — — (334,164) — (334,164)
March 31, 2021 49,504,449 25,223,995 — — 3,980,055 (25,222,035) 1,731 3,983,746
Net loss for the period — — — — — (638,474) — (638,474)
June 30, 2021 49,504,449 25,223,995 — — 3,980,055 (25,860,509) 1,731 3,345,272
----- End of picture text -----

See accompanying notes

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

1. CORPORATE INFORMATION

Stroud Resources Ltd. [the "Company" or "Stroud"] was incorporated on March 18, 1983 under the laws of the Province of Ontario. Stroud is an international mineral exploration company with an exploration portfolio in Canada and Mexico. The Company holds its interest in its Mexican properties through its wholly owned subsidiary, Compañia Minera San Diego y La Espanola S.A. de C.V. ["Compañia Minera"], which holds prospecting and exploration permits for the properties. The address of the Company's registered office is 1090 Don Mills Rd. Suite 404, Toronto, Ontario, M3C 3R6, Canada.

2. CONTINUANCE OF OPERATIONS AND GOING CONCERN

The Company has not yet determined whether its properties contain mineral reserves that are economically recoverable. The recoverability of the amounts shown for mineral properties and deferred costs is dependent upon the existence of economically recoverable resources, the ability of the Company to obtain all necessary permits and raise financing to complete the exploration and development, and future profitable production or proceeds from the disposition of such properties. Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, social licensing requirements, unregistered prior agreements, unregistered claims, aboriginal claims, and non-compliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, expropriation of properties, currency exchange fluctuations and restrictions and political uncertainty. These risks may adversely affect the investment in the properties and may result in the impairment or loss of all or part of the Company's mineral properties.

These condensed interim consolidated financial statements have been prepared using accounting policies applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they become due. The Company has an accumulated deficit of $25,860,509 as at June 30, 2021 [December 31, 2020 – $24,887,871] of which a net loss of $972,638 was incurred during the current period [2020 – $237,041]. For the six months ended June 30, 2021, the Company had negative operating cash flows of $1,161,460 [2020 – negative $4,186].

The Company expects that it has sufficient cash to continue operations during 2021 and into 2022. In order to continue its operations beyond that, the Company requires additional financing which, if not raised, would result in the curtailment of activities, and to the extent appropriate counterparties can be found, the sale, option or joint venturing of assets may be warranted. The Company's ability to continue to meet its obligations and carry out its planned exploration activities is uncertain and dependent upon its ability to obtain further funds. There can be no assurances that the Company will be able to raise sufficient financing or on terms acceptable to management.

If the going concern assumption is not appropriate, adjustments will be necessary to carrying amounts and classification of assets, liabilities and expenses in the consolidated financial statements. Such adjustments could be material.

1

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

Novel Coronavirus (“COVID-19”)

The Company’s operations have been significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company’s drilling permits were delayed about 5 months with delays associated with shutdowns related to Covid-19. The Company cannot accurately predict the impact COVID-19 will have on future operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

3. BASIS OF PRESENTATION

Statement of compliance

These condensed interim consolidated financial statements, including comparative figures, have been prepared in accordance with International Financial Reporting Standards ["IFRS"] as issued by the International Accounting Standards Board ["IASB"].

The condensed interim consolidated financial statements were authorized for issue on August 30, 2021, the date the Board of Directors approved the condensed interim consolidated financial statements.

Significant accounting judgments, estimates, and assumptions

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies.

[a] Principles of consolidation

The consolidated financial statements reflect the financial position and results of operations of the Company and its wholly owned subsidiary Compañia Minera. All intercompany transactions and balances have been eliminated.

[b] Comprehensive income (loss)

Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of the cumulative translation adjustment of the Company's wholly owned subsidiary Compañia Minera. The components of comprehensive income (loss), if any, are disclosed in the consolidated statements of income (loss) and comprehensive income (loss).

2

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

[c] Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances with banks, and short-term fixed income deposits with original maturity dates shorter than three months. As at June 30, 2021, the Company had $3,102,272 in interest bearing accounts with a Canadian financial institution [December 31, 2020- $4,271,143].

[d] Mineral properties and deferred costs

In order to enhance the relevance to the decision-making needs of users and improve comparability with its peers, the Company has voluntarily changed its accounting policy with respect to exploration properties and deferred exploration expenditures, consistent with the guidance provided in IFRS 6 – Exploration for and Evaluation of Mineral Resources and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. The new accounting policy was adopted and applied retrospectively as of January 01, 2019. In prior periods the Company’s policy was to capitalize the costs related to acquisition of, exploration for and development of mineral claims and crediting any revenues received prior to commercial production against the cost of the related claims. The Company elected to change this accounting policy to expense exploration expenditures as incurred on a retrospective basis.

The full accounting policy is as follows:

The Company expenses exploration and evaluation expenditures as incurred. Exploration and evaluation expenditures include acquisition costs of mineral property rights, property option payments and exploration and evaluation activities.

Once a project has been established as commercially viable, technically feasible and the decision to proceed with development has been approved by the Board of Directors, related development expenditures are capitalized. This includes costs incurred in preparing the site for mining operations. Capitalization ceases when the mine is capable of commercial production.

Impact on the financial statements:

The change in accounting policy requires full retrospective application per IAS 1 – Presentation of Financial Statements. Given there is no impact on the consolidated financial statements overall, a third statement of financial position will not be presented.

[e] Equipment

Equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. The cost of an item consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is provided at rates calculated to write off the cost of equipment, less the estimated residual value, using the declining balance method over the following expected useful lives:

Drilling Equipment

20%

3

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

If impairment indicators are present, the Company compares the carrying value of an asset to its estimated net recoverable amount, based on estimated future cash flows to determine whether there is any impairment. The depreciation method, useful life and residual values are assessed annually.

[f] Share-based payments

Share-based payments to employees are measured at the fair value of the instruments issued at the grant date and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued at the grant date, if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received.

The amount expensed for stock option compensation is based on the application of the Black-Scholes option pricing model, which is highly dependent on the expected volatility of the Company's registered shares and the expected life of the options. On exercise, the original value recorded for options is reclassified to share capital with the exercise price received. On expiry, the original value recorded for options remains in reserves.

[g] Determination of reserves and resources

The Company uses the services of experts to estimate the indicated and inferred resources of its mineral properties in Mexico and oil and gas interests in Canada. These experts express an opinion based on certain technological and legal information as prepared by management as being current, complete and accurate as of the date of their calculations and in compliance with National Instrument 43-101. These estimated resources are used in the evaluation of the carrying values, amortization rates and the timing of cash flows.

[h] Income taxes

Current income taxes are recognized for the estimated income taxes payable for the current year. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and on unclaimed losses carried forward and are measured using the substantively enacted tax rates that are expected to be in effect when the differences are expected to reverse, or losses are expected to be utilized.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized, except:

4

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized, or the liability is settled, based on tax rates [and tax laws] that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to settle current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

[i] Provision for environmental rehabilitation

If required, a provision will be made for asset retirement, restoration and for environmental rehabilitation costs [which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas] in the financial period when the related environmental disturbance occurs, resulting in a legal or constructive obligation to the Company. The provision would be based on the estimated future costs using information available at the condensed interim consolidated statement of financial position date. The provision would be discounted using a current market-based pre-tax discount rate and the accretion of the discount would be included in amortization and accretion expense. At the time of establishing the provision, a corresponding asset would be capitalized, where it gives rise to a future benefit, and depreciated over future production from the mine to which it relates.

Any provision would be reviewed on an annual basis for changes to obligations, legislation or discount rates that effect change in cost estimates or life of operations. The cost of the related asset would be adjusted for changes in the provision resulting from changes in the estimated cash flows or discount rate, and the adjusted cost of the asset would be depreciated prospectively. As at June 30, 2021 and December 31, 2020, management has estimated that no material provision is required for environmental rehabilitation.

5

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

[j] Foreign currency

The functional currency of the Company is the Canadian dollar, and the functional currency of the Company's subsidiary is the Mexican peso. The condensed interim consolidated financial statements are presented in Canadian dollars, which is the Company's presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the condensed interim consolidated statements of loss.

The results and financial position of entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each condensed interim consolidated statement of financial position presented are translated at the closing rate at the date of that statement of financial position

• income and expenses for each condensed interim consolidated statement of income (loss) and comprehensive income (loss) are translated at average exchange rates [unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the date of the transaction]; and

• all resulting exchange differences are recognized as a separate component of equity [accumulated other comprehensive income (loss)].

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are recorded in equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the condensed interim consolidated statements of loss as part of the gain or loss on disposal or sale.

[k] Financial instruments and liabilities

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Cash and cash equivalent and accounts receivable are measured at amortized cost.

6

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

Subsequent measurement – financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the condensed interim consolidated statements of income (loss).

Subsequent measurement – financial assets at FVPL

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the condensed interim consolidated statements of financial position with changes in fair value recognized in other income or expense in the condensed interim consolidated statements of income (loss). The Company does not measure any financial assets at FVPL.

Subsequent measurement – financial assets at FVOCI

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the condensed interim consolidated statements of comprehensive loss. When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the condensed interim consolidated statements of income (loss) when the right to receive payments is established.

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

The Company’s only financial assets subject to impairment are other accounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, account receivables are grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability

7

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

at FVPL. The Company’s financial liabilities include accounts payable and accruals and advances from shareholders which are each measured at amortized cost. All financial liabilities are recognized initially at fair value.

Subsequent measurement – financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance cost in the condensed interim consolidated statements of income (loss).

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the condensed interim consolidated statements of income (loss).

[l] Income (loss) per share

The basic income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the year. The diluted income (loss) per share reflects the potential dilution of common share equivalents, such as outstanding stock options and share purchase warrants, in the weighted average number of common shares outstanding during the year, if dilutive. The "treasury stock method" is used for the assumed proceeds upon the exercise of the options and warrants that are used to purchase common shares at the average market price during the year.

[m] Significant accounting judgments

The critical judgments that the Company's management has made in the process of applying the Company's accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognized in the Company's consolidated financial statements, are related to the economic recoverability of the mineral and oil and gas properties and deferred costs (note 3(d) and note 6), equipment (note 3(e)), functional currency determination for the Company and its subsidiary (note 3(j)), appropriateness of expenditures renounced for flow through purposes, valuation of provisions for environmental rehabilitation (note 3(i)), determination of income, value added, withholding and other taxes (note 3(h)), and assumption of going concern (note 2).

[n] Significant accounting estimates

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the consolidated statements of financial position date, that could result in a material adjustment to the carrying

8

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

• impairment of non-financial assets (notes 3(d), (e), (q) and (r) and note 6);

• the inputs used in accounting for share-based compensation expense in the consolidated statements of income (loss) and comprehensive income (loss) (notes 3(f) and 9(c));

• the provision for income taxes which is included in the consolidation statements of income (loss) and comprehensive income (loss) and composition and valuation of deferred income tax assets and liabilities included in the consolidated statements of financial position (note 3(h) and11); and

• the inputs used in determining the various commitments and contingencies accrued in the consolidated statements of financial position (notes 6, 7 and 13).

[o] Flow-through shares

Flow-through shares issued are recognized in share capital based on the quoted market price of the Company's shares on the date of issue. Any premium between the amount recognized in common shares and the amount the investor pays for the shares is recognized as a deferred gain, which is recognized in net income as gain on flowthrough share premium when the eligible expenditures are renounced and the related spending has occurred. The Company also indemnifies the subscribers of flow-through shares against any tax related amounts that become payable as a result of the Company not fulfilling its responsibility pursuant to the subscription agreements between the Company and subscribers.

[p] Other accounting changes

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2021. Many are not applicable or do not have a significant impact to the Company and have been excluded.

IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined; however early adoption is permitted.

IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023.

9

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

[q] Impairment of long-lived assets

At each reporting date, the carrying amounts of the Company's long-lived assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.

For the purposes of impairment testing, long-lived assets are allocated to cash-generating units to which the exploration activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognized immediately in profit or loss.

[r] Oil and gas interests

Costs capitalized include land acquisition costs, geological and geophysical expenditures, rentals on undeveloped properties and drilling and overhead expenses related to exploration and development activities.

Revenue, net of royalties from oil and gas operations is recognized when title passes from the Company to the customer, generally at the time of shipment.

The costs related to oil and gas interests are depleted and amortized on a unit-of-production basis. The carrying values of oil and gas assets are reviewed periodically, when impairment factors exist, for possible impairment. The recoverable amounts of oil and gas assets are determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. Estimates include but are not limited to estimates of the discounted future after-tax cash flows expected to be derived from the Company’s oil and gas assets and the discount rate.

[s] Provisions

The Company records provisions which include various estimates, including the Company's best estimate of the future costs associated with settlement of the obligation, with discount rates applied. Such estimates are necessarily calculated with reference to external sources, all of which are subject to annual review and change.

4. FINANCIAL INSTRUMENTS AND CAPITAL RISK MANAGEMENT

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and advances from shareholders. Unless otherwise noted, the Company is not exposed to significant interest rate, currency or credit risks arising from these financial instruments.

10

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

Fair value

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and advances from shareholders approximates their carrying values due to their short-term maturity.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the condensed interim consolidated statement of financial position dates.

[i] Cash and cash equivalents

The Company minimizes its exposure to credit risk by keeping the majority of its cash and cash equivalents as cash on deposit with a major Canadian chartered bank. Management expects the credit risk to be minimal.

[ii] Receivables

Management does not expect these counterparties to fail to meet their obligations. Account receivables are in good standing as of June 30, 2021 and December 31, 2020. The Company does not have receivables that it considers impaired or otherwise uncollectible.

Foreign currency risk

The prices paid by the Company for some services and supplies are paid in U.S. dollars or Mexican pesos and the Company generally raises funds in Canadian dollars. As at June 30, 2021 and December 31, 2020, the Company believes the currency risk is limited and not a risk to be hedged at the present time.

Interest rate risk

Interest rate risk arises because of changes in market interest rates. The Company is exposed to interest rate risk on short-term advances and advances from shareholders. Due to the short-term nature of these borrowings and the fixed nature of their interest rates, the Company believes interest rate risk is minimal.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities as they come due. The Company's objective is to maintain sufficient liquid resources to meet operational requirements. As at June 30, 2021, the Company had cash and cash equivalents of $3,105,272 [December 31, 2020 - $4,271,143]. The cash in the Company is sufficient to fund operations during 2021 and into 2022. Following that, the Company will raise additional monies to fund future exploration programs, but there can be no assurance that it will be successful in these efforts (note 2).

Capital risk

The Company's objectives when managing capital are: [i] to safeguard the Company's ability to continue as a going concern in order to pursue the development of its mineral properties and provide returns for shareholders, and [ii] to maintain a flexible capital structure, which optimizes the cost of capital at an acceptable risk. The Company includes the components of shareholders' equity, cash and cash equivalents and short-term investments, if any, in the management of capital.

11

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents and short-term investments.

To facilitate the management of its capital requirements, the Company prepares forecasts or expenditure budgets for its activities that are used to monitor performance. Variances to plan will result in adjustments to capital deployment subject to various factors and industry conditions. The Company's activities and associated forecasts or budgets are approved by the Board of Directors.

The Company's capital management objectives, policies and processes have remained unchanged during the period ended June 30, 2021 and the year ended December 31, 2020.

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than of the TSX Venture Exchange (“TSXV”) which requires adequate working capital or financial resources of the greater of (i) $50,000 and (ii) an amount required to maintain operations and cover general and administrative expenses for a period of 6 months. As of June 30, 2021, the Company believes it is in compliance with the policies of the TSXV.

The Company's investment policy is to invest its cash in highly liquid, short-term, interest-bearing investments with maturities of less than a year from the original date of acquisition, selected with regard to the expected timing of expenditure from operations.

Commodity price risk

The ability of the Company to explore and evaluate its exploration and evaluation properties and the future profitability of the Company are directly related to the price of certain minerals and natural gas. The Company monitors commodity prices to determine the appropriate course of action to be taken.

5. EQUIPMENT

Equipment consists of drill equipment with a cost of $674,382. The equipment was impaired in 2015 and the net book value at June 30, 2021 and December 31, 2020 is $nil.

6. MINERAL PROPERTIES AND DEFERRED COSTS AND OIL AND GAS INTERESTS

The Company has exploration and royalty rights in the following mineral properties.

Santo Domingo Project

The Company has a 100% interest in Compañia Minera. Compañia Minera owns certain mineral concessions in the state of Jalisco, Mexico. The Company was obligated to pay Eagle Graphite Incorporated [“Eagle”] (formerly Amerix Precious Metals Corporation) a royalty fee of 5% from any of Compañia Minera's net proceeds of sale of minerals to a maximum of $1,000,000. On August 22, 2019, the Company and Eagle agreed to amend the agreement to reduce

12

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

the royalty to 2.5% to a maximum of $500,000. The Company has the right to purchase the royalty for $300,000 any time prior to August 31, 2021. The Company paid $100,000 to amend the original agreement.

An additional amount of USD $2,450,000 ($3,201,146) was to be paid in quarterly installments to a prior owner, if and when revenue is generated from minerals extracted by Compañia Minera, commencing three months after the start of commercial production. Each quarterly installment will be equal to 0.5% of the net smelter return [defined as revenue actually received by Compañia Minera from the sale of smelter minerals]. In 2011, the Company paid USD $100,000 ($135,650) to the prior owner in consideration for the prior owner agreeing to reduce the additional amount to be paid to USD $2,325,000 ($3,153,862). In 2014, the Company paid USD $30,000 ($40,695) to the prior owner in consideration for the prior owner agreeing to reduce the additional amount to be paid to USD $2,285,000 ($2,985,000).

On September 7, 2019, the Company and the royalty holder agreed to reduce the royalty to 0.5% of sales to a maximum of USD $1,160,000 ($1,515,644). The Company has the right to purchase the royalty for USD $685,000 ($895,014) any time prior to September 7, 2021. The Company agreed to pay USD $235,000 ($307,049) to amend the agreement, of which USD $25,000 ($32,665) was paid in September 2019 and the balance of USD $210,000 was paid in January 2020.

During 2014, the Company determined there were indicators of impairment due to commodity prices and therefore tested the property for impairment. The Company determined that a write-down of the property was required. Annually since 2014, as a result of no significant improvements in commodity prices, uncertainty related to the status of the property, and no significant advancement of property exploration and evaluation, the Company has determined that insufficient indicators exist to contemplate the reversal of impairment in accordance with the Company’s policies. As a result, the Company impairs any property costs incurred.

The process of determining impairment and reversals of impairment related to exploration and evaluation properties is highly subjective. This process requires the exercise of significant judgement by management given the limitations related to information that can be used to value mineral properties at such an early stage of exploration and evaluation. Other considerations by management include the ability of the Company to fund projects, the current and past ability of the Company to advance the project, commodity prices, and the jurisdiction of the underlying property. As at December 31, 2019, the Company has determined that the carrying value of its property interest is fully impaired.

Effective January 1, 2020, the Company has adopted a policy of expensing all expenditures on the Santo Domingo Project.

In order to maintain the Company’s mineral concessions and titles in good standing, the Company is required to maintain a prescribed minimum of annual exploration expenditure and pay fees semi-annually to the Secretaria de Economia in Mexico. Failure to make the annual concession payments or incur the minimum annual exploration expenditures, to the satisfaction of the Mexican authorities, or a determination that the expenditures incurred are not qualifying expenditures, may result in the cancellation or forfeiture of the mineral concessions. Management believes that all payments made are appropriate and current.

13

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

In November 2017, the Company signed a new agreement with the owners of the surface rights on the Santo Domingo property. The Company paid USD $4,177 ($5,583) for 2017, USD $4,595 ($6,141) for 2018 and USD $5,055 for 2019. The remaining payments are due as follows:

November 3, 2021 – USD $6,116 ($7,786) November 3, 2022 – USD $6,728 ($8,565)

Hislop Project

The Company holds a net smelter royalty (“NSR”) of 0.5% on properties located in Hislop Township, Ontario. The property owner of the Hislop Project may purchase the royalty for $1,000,000.

Leckie Project

The Company holds a 1% NSR on the Leckie Project. Temagami Gold Inc. (“Temagami”), the property owner of the Leckie Project can purchase the NSR for $500,000 for each 0.5% of royalty. The Company holds 750,000 common shares of Temagami. As at June 30, 2021 and December 31, 2020, Temagami is a privately held corporation and a market price for its shares could not be established. The Company attributed a value of $nil to the shares of Temagami which it holds.

Oil and Gas Interests

The Company holds a 3.75% interest in six oil and gas producing properties in Alberta. The properties are currently operated by Gain Energy Inc. The Company's proportionate share of the revenue from these properties, net of operating expenses, is received from the operator on a monthly basis.

7. PROVISION

The Company settled a 2008 employment dispute with a payment of USD $15,000 ($19,485) during 2020.

8. RELATED PARTY TRANSACTIONS

In accordance with IAS 24, key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key management of the Company for the six months ended June 30, 2021 and 2020:

Administrative and professional fees Director fees	2021 $ 2020 $
	30,000 30,000 30,000 22,500
	60,000 52,500

14

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

9. SHAREHOLDERS' EQUITY (DEFICIT)

[a] Share capital

Authorized share capital consists of unlimited common shares with no par value.

The continuity of share capital is as follows:

continuity of share capital is as follows:
Balance at January 1, 2019_(i) Shares issued for private placement(ii) Share issuance costs(ii) Issuance of warrants(ii) Shares issued on conversion of debt(iii) Balance at December 31, 2019 Shares issued for private placement(iv) Share issuance costs(iv) Issuance of warrants(iv) Exercise of warrants(v) Exercise of stock options(vi)_ Balance, December 31, 2020 Shares to be issued Balance, June 30, 2021	Shares Amount
	# $ 19,644,067 19,968,215 13,333,333 2,000,000 — (166,043) — (318,250) 3,857,605 385,760
	36,835,005 21,869,682 7,500,000 3,000,000 — (231,872) — (528,746) 4,444,444 759,555 275,000 117.776
	49,054,449 24,986,395 450,000 237,600
	49,054,449 25,223,995

i. On August 28, 2019, the Company consolidated its issued and outstanding common shares on the basis of one post-consolidation share for every ten pre-consolidation shares. Current and comparative disclosure has been amended to reflect this share consolidation.

• ii. The Company issued, in two tranches, 13,333,333 units for gross proceeds of $2,000,000 to one investor. The first tranche on August 30, 2019 comprised 3,909,939 units and gross proceeds of $586,491. The second tranche on October 29, 2019 comprised 9,423,394 units and gross proceeds of $1,413,509. Each unit is comprised of 1 common share and 1/3 warrant. Each full warrant allows the holder to purchase one common share at a price of $0.15 for a period of 12 months. See note 8 and note 9(b).

• iii. The Company converted $578,641 of debt owing to directors, officers and consultants into 3,857,605 common shares with a value of $385,760 based on the market price of the company’s shares at the time of settlement, recording a gain of $192,881 on the conversion. See note 8.

• iv. The Company issued 7,500,000 units for gross proceeds of $3,000,000 to one investor. Each unit is comprised of 1 common share and 1/2 warrant. Each full warrant allows the holder to purchase one common share at a price of $0.60 for a period of 12 months. See note 8 and note 9(b).

• v. During 2020, 4,444,444 warrants were exercised for gross proceeds of $666,667.

• vi. During 2020, 725,000 options were exercised for gross proceeds of $472,500. In settlement, the Company issued $275,000 common shares during 2020 and 450,000 common shares during the period.

15

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

[b] Warrants

The continuity of share purchase warrants outstanding is as follows:

ontinuity of share purchase warrants outstanding is as follows:
Balance at January 1, 2019 Issuance with first tranche of private placement_(i) Issuance of finder’s warrants(ii) Issuance with second tranche of private placement(iii) Less issuance costs Balance at December 31, 2019 Issuance with private placement(iv) Issuance of finder’s warrants(v) Exercise of warrants(vi)_ Balance at December 31, 2020 Expired without exercise Balance at June 30, 2021	Number Value ($)
	— — 1,303,313 81,812 933,333 72,308 3,141,131 197,420 — (33,290)
	5,377,777 318,250 3,750,000 523,122 525,000 129,383 (4,444,444) (279,232)
	5,208,333 691,523
	(3,750,000) (523,122)
	1,458,333 168,401

• i. On August 30, 2019, the Company issued 1,303,313 warrants allowing the holder to purchase 1,303,313 common shares for $0.15 per share until August 30, 2020. The estimated fair value of the warrants of $81,812 was estimated using a Black-Scholes option pricing model with the following assumptions: share price at issuance of $0.13, a risk-free interest rate of 1.41%, an expected life of 1 year, an exercise price of $0.15, a volatility based on comparable companies of 141% and expected dividend rate of nil.

• ii. On August 30, 2019, Company issued 933,333 warrants allowing the holder to purchase 933,333 common shares for $0.20 per share until August 30, 2021. The estimated fair value of the warrants of $72,308 was estimated using a Black-Scholes option pricing model with the following assumptions: share price at issuance of $0.13, a risk-free interest rate of 1.35%, an expected life of 2 years, an exercise price of $0.20, a volatility based on comparable companies of 138% and expected dividend rate of nil.

• iii. On October 29, 2019, the Company issued 3,141,131 warrants allowing the holder to purchase 3,141,131 common shares for $0.15 per share until October 28, 2020. The estimated fair value of the warrants of $197,420 was estimated using a Black-Scholes option pricing model with the following assumptions: share price at issuance of $0.13, a risk-free interest rate of 1.72%, an expected life of 1 year, an exercise price of $0.15, a volatility based on comparable companies of 141% and expected dividend rate of nil.

• iv. On July 30, 2020, the Company issued 3,750,000 warrants allowing the holder to purchase 3,750,000 common shares for $0.60 per share until July 30, 2021. The estimated fair value of the warrants of $523,122 was estimated using a Black-Scholes option pricing model with the following assumptions: share price at issuance of $0.40, a risk-free interest rate of 1.72%, an expected life of 1 year, an exercise price of $0.60, a volatility based on comparable companies of 141% and expected dividend rate of nil.

• v. On July 30, 2020, the Company issued 525,000 warrants allowing the holder to purchase 525,000 common shares for $0.60 per share until July 30, 2022. The estimated fair value of the warrants of $129,383 was estimated using a Black-Scholes option pricing model with the following assumptions: share price at issuance of $0.40, a risk-free interest rate of 1.35%, an expected life of 2 years, an exercise price of $0.60, a volatility based on comparable companies of 138% and expected dividend rate of nil.

16

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

As at June 30, 2021, the following warrants were outstanding:

Date of Issue Weighted Average Exercise Price Expiry Date Warrants Outstanding Warrants Exercisable Remaining Life	Date of Issue Weighted Average Exercise Price Expiry Date Warrants Outstanding Warrants Exercisable Remaining Life	Date of Issue Weighted Average Exercise Price Expiry Date Warrants Outstanding Warrants Exercisable Remaining Life
August 30, 2019 July 30, 2020	$0.20 August 30, 2021 $0.60 July 30, 2022 $0.16	933,333 933,333 0.17 years 525,000 525,000 1.08 years 1,458,333 1,458,333 0.58 years

[c] Stock options

On September 12, 2019, the Company granted incentive stock options to consultants, directors and officers of the Company to purchase an aggregate of 630,000 common shares under the company's stock option plan. Each option is exercisable at a price of $0.18 per common share, expires three years from the date of grant and vests on the date of grant. Stock-based compensation expense of $81,000 was recognized for the grant of options. Of these options, 505,000 were granted to directors and officers. See note 8.

On October 30, 2019, the Company extended the expiry date of 750,000 options from March 14, 2020 to December 31, 2021.

[d] Diluted income (loss) per share

Basic net income (loss) per share is computed by dividing the net income or (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed similarly except that the weighted average number of common shares is increased to reflect all dilutive instruments. Diluted net income per share is calculated using the treasury stock method. In applying the treasury stock method, employee stock options with an exercise price greater than the average quoted market price of the common shares for the period outstanding are not included in the calculation of diluted net income per share as the impact is anti-dilutive. Potentially dilutive instruments are not considered in calculating the diluted loss per share, as their effect would be anti-dilutive.

Below is a reconciliation of the basic and diluted weighted average number of common shares and the computations for basic and diluted net income (loss) per share for the six months ended June 30, 2021 and June 30, 2020:

Net loss Weighted average common shares outstanding Net loss per share	2021 2020
	$972,638 $237,041 49,504,094 36,935,000
	$0.019 $0.006

17

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

[e] Shares to be issued

The Company issued 450,000 common shares in January 2021 in settlement of 450,000 options exercised on December 31, 2020. The shares were issued during the period ended June 30, 2021.

10. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

The net change in non-cash working capital balances related to operations consists of the following:

Account receivables Prepaid expenses Accounts payable and accrued liabilities	2021 2020 $ $
	52,979 (6,391) (248,661) (26,333) 6,860 (282,848)
	(188,822) (315,272)

11. INCOME TAXES

The provision for income taxes differs from the expense that would be obtained by applying Canadian statutory rates to loss before income taxes as a result of the following:

Income (loss) before income taxes Statutory tax rate Expected income tax expense (recovery) Change in benefit of tax assets not recognized Total income tax expense	2021 2020 $ $
	(972,638) (237,041) 26.50% 26.50%
	(257,750) (62,815) 257,750 62,815
	— —

Deductible temporary differences and unused tax losses

The following deductible temporary differences and tax losses have not been tax-benefited on the consolidated financial statements as at June 30:

Non-capital losses carried forward Mineral properties and deferred costs Equipment Other Total	2021 2020 $ $
	4,099,000 4,099,000 2,004,473 2,004,473 881,601 881,601 1,065,876 1,065,876
	8,050,950 8,050,950

In addition, the Company has non-capital losses for Canadian tax purposes totaling approximately $4,099,000 that have not been benefited and expire as follows:

18

Stroud Resources Ltd.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in Canadian dollars unless otherwise noted]

For the six months ended June 30, 2021 and 2020

2026 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2040	$
	119,000 469,000 185,000 634,000 568,000 488,000 497,000 168,000 228,000 284,000 119,000 219,000 121,000
	4,099,000

12. SEGMENTED INFORMATION

The Company operates in two segments: [1] mineral exploration and [2] oil and gas exploration and development. All required segment information is disclosed in the Company's condensed interim consolidated statements of income (loss) and comprehensive income (loss) and notes 6 and 7.

13. CONTINGENCIES

The Company’s exploration and evaluation activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its activities are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

Pursuant to an agreement with its geologist, the company has a commitment to provide notice prior to termination of the agreement with a value of $8,800.

19